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Dealing with farm finance

Many farmers had part of their overdraft withdrawn by banks after receiving their single farm payment last winter without any negotiation according to a farm charity.

This resulted in farmers not having the working capital they needed. In fairness, the banks insist that they are supporting farmers.

Jimmy McLean, head of agricultural services at NatWest and RBS, said they were being as sensitive as possible in difficult circumstances.

Farmers need to demonstrate how finance will be put to good use in their business to ensure they receive adequate funding to tide them through poor weather problems.

Nick Parkes, partner at Bates Weston LLP said:

“In recent years, farmers have suffered one set-back after another resulting in on-going cashflow problems, most recently the poor Spring weather. This has caused particular concerns when requiring funds for renewing equipment, bulk fertiliser and seed purchases etc.

The initial reaction is to approach the bank for additional finance, but before resorting to this, alternative options should be considered. Selling rarely-used old equipment can realise funds to reduce the dependence on finance. Extending credit terms with suppliers, or agreeing a payment plan such as arable farmers agreeing to pay for fertiliser purchases out of the sale of grain at a later date.

Having exhausted these other options, it only remains to speak to the bank. Before doing this the farmer should ensure there is a firm plan in place. The long-term should be considered and performance assessed in detail. The assessment of required funds should cover this long-term view as the bank will not be open to repeated requests for further finance. Having to approach the bank at a later date due to poor planning will be difficult. Farmers will have to ensure their record keeping is of such a standard that will allow accurate business monitoring. The three things banks are looking for when lending are:

  • a track record of good borrowing
  • a business plan going forward
  • a certain loan-to-value ratio in the business


If you would like to speak with Nick regarding your financial plans, please call him on 01332 365855 or email